Basis: Section 4.1-103 of the Code of Virginia
authorizes the board to promulgate regulations in accordance with the
Administrative Process Act (§ 2.2-4000 et seq. of the Code of Virginia), and
§ 4.1-111 authorizes the board to amend or repeal regulations adopted by
it in accordance with the Administrative Process Act.

Purpose: The amendment adds language that conforms with
the current agency guidance document Circular Letter 06-01 allowing
manufacturers, importers, brokers, bottlers, and wholesalers of alcoholic
beverage to provide and install carbon dioxide filters in wine and beer draft
lines of licensed retail establishments. The amendment has no adverse impact on
the health, safety, or welfare of the citizens of the Commonwealth.

Rationale for Using Fast-Track Rulemaking Process: The
amendment is expected to be noncontroversial as it merely conforms the
regulation with current practice.

Substance: The amendment provides that representatives
of manufactures, importers, bottlers, brokers, or wholesalers of wine and beer
products may provide and install without charge carbon dioxide filters in draft
beer lines of retail licensees.

Issues: The primary advantage for the agency, regulated
community, and the public in amending 3VAC5-30-60 is to conform the regulation
with a guidance document and current practice within the regulated community.
Another advantage for the agency is the fulfillment of the commitment made to
update the regulation when the guidance document was issued. Furthermore, the
allowance of this practice enables businesses to ensure that product quality
and integrity are preserved without additional expense to many small
businesses. There are no disadvantages to the Commonwealth or the public.

Department of Planning and Budget's Economic Impact
Analysis:

Summary of the Proposed Amendments to Regulation. The Alcoholic
Beverage Control Board (Board) proposes to specify that any manufacturer,
importer, bottler, broker or wholesaler of alcoholic beverages may provide to
retail licensees carbon dioxide filters without charge and install such filters
in the retailers draft beer lines.

Result of Analysis. The benefits exceed the costs for the
proposed change.

Estimated Economic Impact. A carbon dioxide filter is a device
placed in the gas line of a beer dispensing system. Its purpose is to filter
impurities from carbon dioxide gas so that the impurities do not end up in
draft beer. These filters were not prevalent when this regulation was first
drafted, and therefore were not included in the items that could be given to
retailers. Since the carbon dioxide filters could only be sold to retailers and
not given, beer manufacturers/wholesalers became concerned with the integrity
of their product as some retailers did not have the same concerns and thus were
not willing to purchase the filters.1

On February 14, 2006, the Department of Alcoholic Beverage
Control (Department) issued a guidance document2 stating that the
Board approved the provision of carbon dioxide filters free of charge. The
Board's proposed amendment to this regulation conforms the regulation to this
policy that has been in effect since 2006. Thus the proposal will not affect
the carbon dioxide filter rule in practice, but will be beneficial in that it
will improve clarity for readers of the regulation who have not also seen the
guidance document.

Businesses and Entities Affected. The proposed amendment to the
regulation merely clarifies, and does not change, an existing rule. The carbon
dioxide filter rule potentially affects manufacturers, importers, bottlers,
brokers and wholesalers of alcoholic beverages, as well as retail licensees.
According to the Department there are over 9,000 such licensed entities in the
Commonwealth, the majority of which qualify as small businesses.

Projected Impact on Employment. The proposed amendment does not
significantly affect employment.

Effects on the Use and Value of Private Property. The proposed
amendment does not affect the use and value of private property.

Real Estate Development Costs. The proposed amendment does not
affect real estate development costs.

Small Businesses:

Definition. Pursuant to § 2.2-4007.04 of the Code of Virginia,
small business is defined as "a business entity, including its affiliates,
that (i) is independently owned and operated and (ii) employs fewer than 500
full-time employees or has gross annual sales of less than $6 million."

Costs and Other Effects. The proposed amendment to the
regulation merely clarifies, and does not change, an existing rule. Therefore,
it does not significantly affect costs for small businesses.

Alternative Method that Minimizes Adverse Impact. The proposed
amendment does not adversely affect small businesses.

Adverse Impacts:

Businesses. The proposed amendment does not adversely affect
businesses.

Localities. The proposed amendment does not adversely affect
localities.

Other Entities. The proposed amendment does not adversely
affect other entities.

Agency's Response to Economic Impact Analysis: The
Department of Alcoholic Beverage Control concurs with the economic impact
analysis prepared by the Department of Planning and Budget.

Summary:

The amendment allows any manufacturer, importer, bottler,
broker, or wholesaler of alcoholic beverages to provide carbon dioxide filters
to retail licensees without charge and to install such filters in the
retailer's draft beer lines.

A. Any manufacturer, importer, bottler, broker, or
wholesaler, or its representative, may sell, rent, lend, buy for, or give to
any retailer, without regard to the value thereof, the following:

1. Draft beer or wine knobs, containing advertising matter
which shall include the brand name and may further include only trademarks,
housemarks and slogans and shall not include any illuminating devices or be
otherwise adorned with mechanical devices which are not essential in the
dispensing of draft beer or wine; and

2. Tapping equipment, defined as all the parts of the
mechanical system required for dispensing draft beer in a normal manner from
the carbon dioxide tank through the beer faucet, excluding the following:

a. The carbonic acid gas in containers, except that such gas
may be sold only at the reasonable open market price in the locality where
sold;

b. Gas pressure gauges (may be sold at cost);

c. Draft arms or standards;

d. Draft boxes; and

e. Refrigeration equipment or components thereof; and

f. Carbon dioxide filters, which may be provided and
installed without cost.

Further, a manufacturer, bottler or wholesaler may sell, rent
or lend to any retailer, for use only by a purchaser of draft beer in kegs or
barrels from such retailer, whatever tapping equipment may be necessary for the
purchaser to extract such draft beer from its container.

B. Any manufacturer, importer, bottler, broker, or
wholesaler, or their representatives, may sell to any retailer and install in
the retailer's establishment dispensing accessories (such as standards,
faucets, rods, vents, taps, tap standards, hoses, cold plates, washers,
couplings, gas gauges, vent tongues, shanks, and check valves) and carbon
dioxide (and other gases used in dispensing equipment) at a price not less than
the cost of the industry member who initially purchased them, and if the price
is collected within 30 days of the date of sale.

C. Any beer tapping equipment may be converted for wine
tapping by the beer wholesaler who originally placed the equipment on the
premises of the retail licensee, provided that such beer wholesaler is also a
wine wholesaler licensee. Moreover, at the time such equipment is converted for
wine tapping, it shall be sold, or have previously been sold, to the retail
licensee at a price not less than the initial purchase price paid by such
wholesaler.

D. Any manufacturer, bottler or wholesaler of wine or beer
may sell or give to any retailer, bottle or can openers upon which advertising
matter regarding alcoholic beverages may appear, provided the wholesale value
of any such openers given to a retailer by any individual manufacturer, bottler
or wholesaler does not exceed $20. Openers in excess of $20 in wholesale value
may be sold, provided the reasonable open market price is charged therefor.

E. Any manufacturer of spirits may sell, lend, buy for or
give to any retail licensee, without regard to the value thereof, back-bar
pedestals to be used on the retail premises and upon which advertising matter
regarding spirits may appear.

F. Manufacturers of alcoholic beverages and their authorized
vendors or wholesalers of wine or beer may sell at the reasonable wholesale
price to banquet licensees glasses or paper or plastic cups upon which
advertising matter regarding alcoholic beverages may appear.

G. Manufacturers, importers, bottlers, brokers, or wholesalers
of alcoholic beverages, or their representatives, may not provide point-of-sale
advertising for any alcoholic beverage or any nonalcoholic beer or nonalcoholic
wine to retail licensees except in accordance with 3VAC5-30-80. Manufacturers,
importers, bottlers, brokers, and wholesalers, or their representatives, may
provide advertising materials to any retail licensee that have been customized
for that retail licensee (including the name, logo, address, and website of the
retail licensee) provided that such advertising materials must:

1. Comply with all other applicable regulations of the board;

2. Be for interior use only;

3. Contain references to the alcoholic beverage products or
brands offered for sale by the manufacturer, bottler, or wholesaler providing
such materials and to no other products; and

4. Be made available to all retail licensees.

H. Any manufacturer, importer, bottler, broker, or wholesaler
of wine, beer, or spirits, or its representatives, may sell, lend, buy for, or
give to any retail licensee clip-ons and table tents.

I. Any manufacturer, importer, bottler, broker, or wholesaler
of alcoholic beverages, or their representatives, may clean and service, either
free or for compensation, coils and other like equipment used in dispensing
alcoholic beverages, and may sell solutions or compounds for cleaning alcoholic
beverage glasses, provided the reasonable open market price is charged.

J. Any manufacturer, importer, bottler, or wholesaler of
alcoholic beverages licensed in this Commonwealth may sell ice to retail
licensees provided the reasonable open market price is charged.

K. Any licensee of the board, including any manufacturer,
bottler, importer, broker as defined in § 4.1-216 A of the Code of
Virginia, wholesaler, or retailer who violates, attempts to violate, solicits
any person to violate or consents to any violation of this section shall be
subject to the sanctions and penalties as provided in § 4.1-328 of the
Code of Virginia.